Thursday, March 20, 2008

Mortgage Crisis - Part two

I don't think there is a Mortgage Crisis.

Nope, I don't. Even though I could be a finalist in a Mortgage Crisis Victim Poster-Child contest. I think it's much worse than that. The so-called Mortgage Crisis is actually a symptom of two over whelming crisis. The first is a greed crisis in the mortgage industry.

Think about it.

Appraisers are hired by the mortgage company to valuate the property on which they will carry the debt and, yes they carry some of the risk, but nothing like what the poor sap who would be on the street without the house is. However, this is a serious conflict of interest since the mortgage company makes their profits on the loan and the bigger the loan the more profit potential there is. So with a vested interest in the outcome they are more likely to put pressure on the appraiser to produce the result they want.

This isn't just my idea, the radical press rags like the Wall Street Journal are all over this one and it isn't likely to get better any time soon. The second crisis is a materialism crisis in modern society. Folks are up to their necks in credit card debt and you have to go way out of your way to even reduce the efforts to market products to you that you could well get along without.

Do we really need that new screaming fast computer with nearly enough storage space to hold the Library of Congress just to surf the net and read email? Do I really a bike that's lighter than a popcorn fart and more expensive than a divorce? Sure there are lots of very useful things out there that can make life much easier but who really benefits when we believe that "for everything else there's MasterCard"? Is it a good idea to put your tax debt on a credit card and increase the amount of your taxes? Do we really need all the storage facilities that have cropped up over the years? I grew up in the twin cities and there was, to the best of my awareness, no such thing as a storage locker where you could put the overwhelming amount of crap we think we need but can't find room for.

When did we convert from finding satisfaction in living life to believing that our satisfaction requires things? I confess, I lust after that screaming computer and I want it light enough to carry around on the popcorn fart bike I lust after as well. Want and need are two different things. While I like to blame the mortgage company for my situation, I know that I had a role as well.

We were the ones who signed for the refinancing loan that drained our investment in our home. My role became clearer as I packed up the piles of crap that had collected in the mansion over 20+ years of materialistic wedded bliss torture. Did we really need every kitchen gadget and garden tool that came along promising to make life easier? Did I really need enough clothing that I could go for weeks without repeating? Whether I did or not remains unsolved but what is clear is the pattern that I felt the need to purchase all this crap and, here's the key point, purchase it on credit? Fine, buy the gadgets you want but for crying out loud, only if you can afford them. Not the credit industry's definition of afford, the old tyme definition of afford meaning to purchase with left over cash.

Having enough credit limit is not the same as being able to afford to make the purchase.

Refinancing your home to take a vacation makes as much sense as finally repaying your debt to a dead relative by tossing the cash into their coffin; the money's gone but no value is retained (at least be smart enough to write a check in this case…). How is it that my early education didn't include that lesson. I am in my fifties and have never once needed to know if Mr. Dinglebury would beat Mr. Glampathoon to Miami if he drove at 65 mph with no stops while Mr. Dinglebury flew but had a three hour lay-over and a 25 mile drive to the airport. What I needed to know was how to manage my finances responsibly. And how is it that we have elected someone whose answer to terrorism is to go shopping to boost the economy so that we could dump the majority of our GNP into a military effort that would allow us to have cheap gas?

OK, perhaps slightly off topic but then again is it really? Isn't it the same thing as spending our hard earned money on something that ends up benefiting someone else and putting our own survival at risk? The issue here is that we are not thinking long term about what we need and shooting our wad over what we want only to find ourselves coming up short when we can least afford to do so. This guy has the right idea, isn't it time we all shift our thinking in this direction? Nope, it's not just a mortgage crisis; it's dying for bling and suffering for our bad choices.